DQOTD: What’s The Downside of Filing Tax Return Early (Now)?

[Midpack]

There are some numbers, mainly to do with foreign taxes paid/foreign source income, that are not available until I see the 1099. These numbers are never reported in the 2022 monthly statements, and a lot of other info is missing like what amount is cap gains income, what amount is 199A income or non-dividend distributions. And while I get some of it later in Jan off the YTD tax info at Fidelity, I really don’t have anything to check their 1099 against.

Agreed, foreign taxes paid is always the last info I get too - and I don't understand why they aren't reported with foreign dividends quarterly. But I got all the foreign taxes paid, 199A income, dividend breakdowns, govt obligations, tax exempt interest, interest and stock trade cap gains from Vanguard on Jan 21.

 

[Cobra9777]

There are some numbers, mainly to do with foreign taxes paid/foreign source income, that are not available until I see the 1099. These numbers are never reported in the 2022 monthly statements, and a lot of other info is missing like what amount is qualified dividends, what amount is 199A income or non-dividend distributions. And while I get some of it later in Jan off the YTD tax info at Fidelity, I really don’t have anything to check their 1099 against.

+1

FTC, qual/non-qual, non-div distrib's, and 199A are all just estimates until I get the 1099 from Fidelity. Fortunately, it's all fairly easy to estimate based on prior years and not a huge variable.

All my holdings at Fidelity are Vanguard and iShares ETFs. So I'm always last in line to get 1099s, usually late Feb. That's probably also why I can't get the FTC, 199A, etc until the 1099 is sent.

 

[steelyman]

I received the 1099 for my (state) pension today, which is good. I have a couple of brokerage statements to go. As soon as those arrive I’ll finish and file. It’s just an annual chore to me that I’m happy to have done and out of the way regardless of the result.

 

[frayne]

Late 1099s or revised 1099s and the PIA of doing a 1040X, other than that, no downside. I get little to no refund or have to pay a tad, so I always file between April 1st and 15th.

 

[RunningBum]

HAHAHAHA! I jinxed myself. I got a new 1099-R today. I didn't recognize the payer at first , and thought maybe it was for someone else, but nope, my name as last 4 of my SSN. Next thought was that someone hacked a retirement account and took some money out.

Finally I recognized the payer as Mass Mutual. I bought an SPIA from them this year, funded from my Roth. Since there are no tax implications, it never made my tax spreadsheet. The monthly payments show up in line 1, and box 7 code T indicate a Roth IRA distribution.

I haven't run it thru TT, but I imagine 1040 line 4a increase by box 1, but 4b does not so there is no change to any other numbers. I don't think I'll even file a 1099-X unless I get a letter from the IRS on it. They may figure out line 4a doesn't equal the total of my 1099-Rs, and if they don't catch the code T they may count it as regular income that I failed to report.

Lesson learned, I will wait until at least a few days after the end of January each year to see if anything forgotten like this shows up.

Go ahead, tell me "I toldja so!", I deserve it.

 

[REWahoo]

Go ahead, tell me "I toldja so!", I deserve it.

Nope, not going there as I have been there and done that.

That's why I wait until mid Feb to file. I would wait even longer if I wasn't concerned about the possibility of identity theft/fake return filing. Recovering from that appears to be a real nightmare.

 

[cathy63]

HAHAHAHA! I jinxed myself. I got a new 1099-R today. I didn't recognize the payer at first , and thought maybe it was for someone else, but nope, my name as last 4 of my SSN. Next thought was that someone hacked a retirement account and took some money out.

Finally I recognized the payer as Mass Mutual. I bought an SPIA from them this year, funded from my Roth. Since there are no tax implications, it never made my tax spreadsheet. The monthly payments show up in line 1, and box 7 code T indicate a Roth IRA distribution.

I haven't run it thru TT, but I imagine 1040 line 4a increase by box 1, but 4b does not so there is no change to any other numbers. I don't think I'll even file a 1099-X unless I get a letter from the IRS on it. They may figure out line 4a doesn't equal the total of my 1099-Rs, and if they don't catch the code T they may count it as regular income that I failed to report.

Lesson learned, I will wait until at least a few days after the end of January each year to see if anything forgotten like this shows up.

Go ahead, tell me "I toldja so!", I deserve it.

Code T means that the custodian doesn't know if you met the 5 yr period. Technically, the IRS knows the answer to that because they do get a 5498 every year that you have a Roth IRA, so they should be able to figure out on their own that you don't owe any tax. However, I suspect that they will not go looking for the evidence that they have and they will probably write you a nice letter telling you how much tax you owe on this withdrawal. I think you should be able to respond by writing a letter and telling them that it's a qualified distribution without having to do an amended return. Worst case, you do the amended return, print it out, and send it in with your written response.

 

[RunningBum]

Code T means that the custodian doesn't know if you met the 5 yr period. Technically, the IRS knows the answer to that because they do get a 5498 every year that you have a Roth IRA, so they should be able to figure out on their own that you don't owe any tax. However, I suspect that they will not go looking for the evidence that they have and they will probably write you a nice letter telling you how much tax you owe on this withdrawal. I think you should be able to respond by writing a letter and telling them that it's a qualified distribution without having to do an amended return. Worst case, you do the amended return, print it out, and send it in with your written response.

Thanks. I appreciate the clarification and guidance. I wouldn't be surprised if the IRS takes the worst case that it doesn't qualify, and I'll have to respond. I suppose I could just proactively send in a 1099-X once I get my refund.

 

[JoeWras]

They always take worst case. Basis is always $0 on stocks sold but not reported. Common problem with NQSO same day sales at megacorp.

 

[RunningBum]

They always take worst case. Basis is always $0 on stocks sold but not reported. Common problem with NQSO same day sales at megacorp.

Yeah, I forgot to report one of those once. Got a letter from the IRS that I owed something like $20K. Yikes. Of course the basis was practically the same so the difference was maybe a dollar or two.

 

[cathy63]

Thanks. I appreciate the clarification and guidance. I wouldn't be surprised if the IRS takes the worst case that it doesn't qualify, and I'll have to respond. I suppose I could just proactively send in a 1099-X once I get my refund.

Yeah, the default is for them to assume it's all taxable.

You would send in a 1040-X, not a 1099-X if you want to amend your return, but it's really better to wait for them to contact you first. Amended returns take months to process and you could very well get a notice from the first return before they get around to even seeing your amended return. So then you'd send in a paper copy as a response to the letter, and then there would be two amended returns floating around and potentially confusing IRS agents.

They could also decide to hold your first return and not issue the refund until you respond. I know they do that for returns that have incorrect W-2 info, but I'm not sure if that applies to missing 1099-Rs or not.

 

[jollystomper]

In the past, when I was due a refund, I would file as soon as all of the 1099 forms were in. I have filed as early as mid-February. Never have a corrected 1099, then again I rarely do any brokerage transactions in my taxable accounts in a year so my 1099s are mainly dividend/capital gains income.

This year I have one more 1099 to go, and it looks like I am due a refund, so I will likely be filing in February sometime.

 

[RunningBum]

Yeah, the default is for them to assume it's all taxable.

You would send in a 1040-X, not a 1099-X if you want to amend your return, but it's really better to wait for them to contact you first. Amended returns take months to process and you could very well get a notice from the first return before they get around to even seeing your amended return. So then you'd send in a paper copy as a response to the letter, and then there would be two amended returns floating around and potentially confusing IRS agents.

They could also decide to hold your first return and not issue the refund until you respond. I know they do that for returns that have incorrect W-2 info, but I'm not sure if that applies to missing 1099-Rs or not.

Yeah, 1040-X. I have issues with mixing up form numbers here.

Again, I appreciate the advice. I won't do anything until and unless I get a letter from the IRS. I've made a note in my own file so I remember what the issue is and how to respond.

 

[Gryphon]

If I'm getting a refund I file as soon as I have all the paperwork & the tax software will let me. This year that turned out to be yesterday; usually it's early-mid February but 1099s came in a bit earlier than usual this year for some reason.

It's been years since I had to send in a check with my return, but when I did I would usually wait until April; if that happened now I don't think I would bother waiting.

The main advantage to filing early is I get the refunds pretty quickly, usually 7-10 days after filing. No downsides so far.

 

[JoeWras]

I'm agreeing that RunningBum should just wait.

There's no ethical problem here. The change is $0. Filing an amended form might even complicate matters. It took almost 9 months to process mine from last year.

Finally, there's a chance this could be handled over the phone when/if RunningBum gets a letter.

Remember my co-workers' 0$ basis tax bills on NQSOs? Well at least back in the late aughts, when this happened, people would call the IRS, tell them it was a same day NQSO, the IRS would accept the explanation, give them a case number, and say it was closed. Today with phone service being trouble everywhere, who knows? But it might work. The key was there was no tax change, which is RunningBum's case.

 

[Time2]

The possibility of having a revised 1099 issued for a brokerage account is the reason I wait a little while. Saves having to file an ammended return. I've only had it happen once and the difference was incidental, but it still could have triggered a mismatch in the IRS system.

One year I went to my accountant in March and got my taxes prepared. We got it all wrapped up I went home, got out of the ca,r grabbed the mail and there it was, a revised 1099! Arrghh!

 

[Cobra9777]

OP, I hope the discussion between RunningBum and cathy63 convinces you to wait. IME, filing 1040-X is like opening a can of worms. It's processed by hand which takes many months and can increase audit risk. If you don't file 1040-X (which is what a lot of experts recommend), waiting for the inevitable letter and then responding can be stressful and time-consuming.

Just wait and minimize the chance of all that. Since you have the IP PIN, there's really no upside to filing early.

 

[Gary from Tampa]

If you're getting a large refund its best to get it in sooner rather than later. If someone files a false tax return as you and gets money back, you may have to wait a while to go through the hoops before you get your money.

 

[Midpack]

If you're getting a large refund its best to get it in sooner rather than later. If someone files a false tax return as you and gets money back, you may have to wait a while to go through the hoops before you get your money.

So an IP PIN doesn't help?

 

[Gary from Tampa]

It helps. This is a game of cat and mouse. The government improves security. The crooks figure a way to beat it. The government adds improved security, the crooks develop a way to beat that etc...